Key Points:
- The technical bias is looking near-term bullish.
- Trade data should see gains extend in the week to come.
- 100 day EMA likely to keep upsides somewhat in check.
The Kiwi Dollar had an interesting week last week and saw some fairly volatile trading despite the broadly bullish trend. As a result, it is worth taking a closer look at what was driving prices and what should be kept in mind as we move forward. In particular, we need to examine what fundamentals could underpin the price action during the coming few sessions.
Starting with last week’s performance, the Kiwi Dollar continued to make steady progress, rallying to 0.7033 following some disappointing US economic news and simultaneously buoyant NZ fundamental figures. Notably, on the US side of things, the respective slips in the Empire State Manufacturing and Philadelphia Federal Manufacturing indices to 5.2 and 22.00 saw selling pressure build during the week, as did the weaker Market Flash Manufacturing PMI result of only 52.8. However, momentum was not solely derived from the US figures as the NZ CPI numbers also saw a sizable uptick of 2.2% q/q which is in stark contrast to the measly 1.3% seen previously.
As for the impending week’s fundamentals, aside from the bevy of US data on offer, there is a handful of NZ –centric news items due out which will be worth watching closely. Namely, the trade numbers are set to be posted on Thursday alongside the nation’s Building Consents which should see some increased volatility during the session. More importantly, however, the Trade Balance is projected to increase to 370M this time around which represents a sizable improvement on the prior posting. As a result, the NZD could build on any early gains made during the week or even reverse any losses stemming from potentially stronger US figures on Tuesday.
As for the technical readings, the NZDUSD should have some bullish sentiment remaining but gains could be capped around the 0.7041 handle. On the one hand, the EMA bias is transitioning to bullish as a result of the recent crossover of the 12 and 20 day averages. Additionally, both the Parabolic SAR and the MACD readings are bullish which should aid in keeping buying pressure in place. However, on the other hand, stochastics are moving into overbought territory and the 100 day EMA is looming nearer which should be an excellent source of dynamic resistance around the 0.7041 mark.
Ultimately, the outlook for the NZD is rather bullish for the week to come, especially if the trade data comes in on target. Even in the case that it doesn’t, if the trend of mixed US numbers continues,the pair’s technical bias should help in pushing it higher which is worth pricing in moving ahead. However, keep the 100 day EMA in mind as it is unlikely that this resistance is broken just yet.
